Something often asked of me in discussions of insurance is, "Dave, how can I save money on insurance?" I'm sure many of you reading this have either asked your agent or insurance representative this exact same question. I'm going to devote this space today to the two-part topic of "Cheaper" versus "Bargain" and how it relates to saving money on insurance. First of all, there are an infinite number of ways to save money. First of all, someone can cancel their insurance all together. I have seen people on more than one occasion who just looked at the insurance line item on their budget every month and decided that this expense was just more than they thought necessary. They reasoned that nothing bad has happened to them, so nothing probably will. This logic is totally sound........until something bad happens. At that point, the resources they have in their possession (that didn't burn down!) are the only resources they have available to pay off whatever damage occurred. If this damage happens to be to your house and it's burned down, Hopefully you have a fairly large bank balance! Rather than asking the question "how can I save money," the better question is, "how can I get the best VALUE for my insurance." I will compare insurance shopping to shopping for breakfast cereal. There is a 24 oz. box of raisin bran, and a 36 oz. box of raisin bran. The 24 oz. box of raisin bran is cheaper, so it MUST be the better buy, right? We all know that "cheaper" is not the same as "value." We have to look at how much each box costs per ounce. Almost every time, the 36 oz. box, though costing more, is the better value because you get more cereal for less. They still sell the smaller boxes because for some people, they don't eat that much cereal, so some of that 36 oz. box would go to waste so it's NOT the best value. With insurance, this same discussion needs to be had. What type of policy you need is not only based on price. I'll give you an example of how two policies that seem exactly the same from the Declarations Page can be very different in the actual policy language. On the Declaration's page, the two companies have liability levels of 100/300/100. Seems very straightforward. This means that whoever is driving the vehicle will be covered for $100,000 for any one person in an accident for bodily injury, $300,000 for bodily injury for the entire accident, and $100,000 for property damage. Piece of cake! Just pick the one that's cheaper, and we're done! Not so fast. When reading the policy language, we look in the "liability" section and see a very interesting little section in one of the policies. The policy says that anyone who is named a "named insured" on the policy who is driving the vehicle will only have liability coverage of state minimum legally required. In California, that's 15/30/5. Here's how the scenario plays out. Cousin Al from Pennsylvania is visiting on vacation. He asks if he can borrow the car for a day trip to the beach. You say, "sure, Al! Here are the keys! Have fun! Don't worry, I've got 100/300/100 liability insurance, so if you hit one of those expensive vehicles in Santa Monica, no worries! I'm covered!" Cousin Al goes to Santa Monica and guess what? He hits a $60,000 Infiniti causing $40,000 worth of damage. You're thinking, "Wow! That's tough! But I'm not worried, I've got $100,000 property damage coverage!" Think again. Only $5000 worth of damage to that vehicle is covered. You'd better hope that "Cousin Al" has a policy that isn't a "cheap" policy and will cover the difference. If not, it's going to get very complicated between family members as to who is responsible for the other $55,000. This is the first part of my "cheap" versus "bargain" series. Next time, I'll go into how to actually save money on your policy while not sacrificing value. Remember that this article is not designed to replace actual advice from an insurance professional who knows your personal situation. If you would like to get more information on YOUR insurance package and how you can get the best value possible, give my office at call at (661) 946-4224 or email me at: dave@thedaveowens.com. I'll help to keep things good between you and "Cousin Al!"
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AuthorDave Owens, Owner/Agent. I have proudly served in the Insurance Industry for over 20 years. Archives
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